{x} | Trading.live

Fundamentals

Spot gold is currently trading around 1911 after a narrow oscillation during the Asian session on Friday (July 7th). Besides, the data released overnight demonstrated that the U.S. labor market is still strong and showing no signs of a slowdown, and the number of new jobs is far exceeded expectations. Moreover, the market strengthens the expectation of the Fed raising interest rates again, which sets the gold under pressure. After a rapid decline from highs, gold once dropped to the lowest level near 1903, a cumulative short-term decline of more than 20 USD, indicating a weak trend. From a short-term point of view, although the U.S. ADP employment data performance is unstable, it is far exceeding market expectations, which may affect tonight's Nonfarm Payrolls data. If the Nonfarm Payrolls follow such a strong trend, the Fed rate hike will be confirmed, which will impact the gold prices. But if contradictory data appear, then gold prices could keep surging to 1930. It is recommended to focus on the release of Nonfarm Payrolls data today.  

Data: June ADP employment was 497,000, while the expected number was 228,000. In addition, the initial jobless claims in the U.S. was 248,000 last week, while the expected number was 245,000. In the week ending June 24th, the continuing jobless claims in the U.S. was 1.72 million, and the expected number was 1.745 million. The Markit U.S. Services PMI final value in June was 54.4, while the expected value was 54.1 and the initial value was 54.1. Furthermore, Eurozone's retail sales data was flat MoM in May, while it was expected to rise 0.2%, and maintained the same as the previous value. The same data was down 2.9% YoY, while it was expected to fall 2.7%, and the previous value, down 2.6%, was revised to down 2.9%.

For investors, it is significant to focus on U.S. Nonfarm Payrolls data for June, which will be released tonight.  

Technical Analysis

Daily chart: There was a big bearish candle covering the daily chart on Wednesday (Ascended for 4 consecutive days), and gold returned to a weak pattern. Additionally, the depreciation continued on Thursday, and it was explained that the weak pattern during the daytime would not fix the direction, but if the data released in the evening is bearish, gold would test the support near 1902. The situation came true yesterday, with gold starting to rebound with oscillations and test the resistance near 1927 in the Europe session. After the beautiful ADP data is released, gold plummeted instantly to 1902, and hovered near 1910 amid some rebounds. Finally, the daily chart ended with a bearish candle that mixed with upper/lower shadows. After this week's depreciation, the daily chart was clearly falling on both Wednesday and Thursday continuously, and the candlestick chart was sitting below the Bollinger middle bands. All these factors suggest a weak daily chart, and gold may reach the Bollinger lower bands or the previous low (1892) if it descends further. Therefore, gold will depreciate on Friday, and Nonfarm Payrolls data will determine if gold falls below the previous low.  

Trading recommendations: From the current pattern, gold may expand the descending area if the Nonfarm Payrolls data is as strong as last night's ADP data. Moreover, gold may find support after plunging to 1982, or even get lower. Instead, if the Nonfarm Payrolls data is worse than expectated, gold may rebound to recover the sentiment. To trade, it is recommended to sell highs during the day and buy lows at night. If gold rises to the 5-day SMA (1916), it is recommended to go short with small positions. However, the risk is growing as the current price level is descending. Thus, it is essential to keep a small position, and be prepared to stop loss. The stop-loss could be set at 1921, cut the positions at 1903, and turn partially into break-even positions. For the remaining positions, try to keep them and wait for the Nonfarm Payrolls data tonight. If the Nonfarm Payrolls data is worse than expected, or just slightly above the expectation, gold may decline rapidly to 1903, and traders can go long shortly after gold gets stable.

Trading Recommendations

Trading direction: Short

Entry price: 1916

Target price: 1903

Stop loss: 1921

Support: 1903.000/1892.000

Resistance: 1916.000/1928.000